FAQ

FAQ

Distributions to the unitholders of an InvIT can be characterised as (i) interest (ii) dividend (iii) other income or (iv) repayment of unit capital (v) a combination of any of the foregoing receipts

The characterization of distribution will depend on nature of net distributable cash flows received by the InvIT from its underlying investment in Special Purpose Vehicles (“SPVs”).

Distributions have to be disbursed at least once every six months in the case of publicly offered InvITs as per the extant SEBI Infrastructure Investment Trusts Regulations, 2014 (as amended from time to time).

IndiGrid has adopted a policy of quarterly distributions to unitholders. This is in line with IndiGrid’s stated objective of providing stable and sustainable distributions to unitholders.

Tabulated below is the summary of different sources of income that can be earned by a unitholder and its taxability under the provisions of the Income-tax Act, 1961 (‘IT Act’):

Nature of income Taxability in the hands of InvIT Taxability in the hands of a tax resident unitholder Taxability in the hands of a tax non-resident unitholder
Distribution of Interest Income earned by InvIT from underlying investment in SPVs Exempt under S.10(23FC) Taxable at applicable tax rate Taxable at concessional rate of 5% (plus applicable surcharge and cess) subject to benefit under applicable Tax Treaty**
Distribution of Dividend Income earned by InvIT from underlying investment in SPVs and units of Mutual Fund* Exempt under S.10(23FC) Exempt under section 10(23FD) in case SPV does not opt for concessional tax regime under S.115BAA
Taxable at applicable tax rate Taxable at 20% (plus applicable surcharge and cess) subject to benefit under the applicable Tax Treaty**
Any other Income earned by InvIT [e.g. interest on bank deposits, capital gains, etc.] Taxable at maximum marginal rate Exempt [S. 10(23FD)] Exempt [S. 10(23FD)]
Capital gains on sale of InvIT units by unitholders on the stock exchange [See FAQ 5] Not applicable Taxable Taxable

*IndiGrid has opted for concessional tax rate regime i.e. 22% plus applicable surcharge & cess under Sec.115BAA of the IT Act for its current SPVs (except PrKTCL). The tax obligation may vary in case the SPV acquired in future does not opt for such concessional tax regime.

** The taxability position is stated as per the provisions under the IT Act. The unitholders can opt for the beneficial provisions under the Double Tax Avoidance Agreement (‘DTAA’) of their respective countries with India.

Tax is required to be deducted by InvIT under the provisions of Section 194LBA of Income Tax
Act, 1961 on distribution of income. Tabulated below is the summary of the same:

Nature of income Withholding Tax Rate
In case of Tax Residents In case of Non- Residents for tax purposes
Distribution of Interest Income earned by InvIT from underlying investment in SPVs 10% 5% plus applicable surcharge and cess
Distribution of Dividend Income earned by InvIT from underlying investment in SPVs, having opted for concessional tax regime under S.115BAA* 10% 10% plus applicable surcharge and cess
Other Income earned by InvIT [e.g. interest on bank deposits etc.] No withholding obligation on InvIT No withholding obligation on InvIT
Capital gains on sale of InvIT units by unitholders on the stock exchange No withholding obligation on InvIT No withholding obligation on InvIT

IndiGrid has opted for concessional tax rate regime under Sec.115BAA of the IT Act for its current SPVs (except PrKTCL). The withholding obligation may vary for future acquisitions, depending on the tax regime of such SPV.

Note 1: Tax withholding by InvIT is made under section 194LBA, hence provisions of section 197A relating to Form 15G/H for nil/ lower withholding rates are not applicable (See FAQ 7).

Note 2: For non-resident unitholders – the Supreme Court in a recent judgement, on the applicability of the provisions of the Double Taxation Avoidance Agreement (DTAA) for withholding tax purposes, held that the obligation to withhold taxes under the special provisions
of the Act is not affected by the DTAA. The benefit of the DTAA can be considered by the payee and if found valid, the taxes withheld can be claimed as a refund with interest. However, such a treatment does not absolve the payer from carrying out withholding obligations under the Income Tax Act,1961 (“the Act”). Consequently, TDS will be deducted at the aforesaid rates mentioned in the Act.

Note 3: For non-resident unitholders, in case of interest distributions, following documents needs to be submitted to distribution@indigrid.com on or before the record date, else TDS will be deducted at 10% by regarding them as Resident for Indian Income Tax purposes :
• Tax residency certificate issued by the tax authorities of respective jurisdictions
• Self-declaration in Form 10F
• Residency declaration

The tax is not required to be withheld on repayment of unit capital and the same is subject to the applicable residential status of unitholders. In relation to taxability of such receipts, the unitholders can consult their tax consultants.

The units of InvIT shall be regarded as long-term asset if the same are held for a period more than 3 years. If held for less than 3 years, then such units will be regarded as short-term capital asset.

If long-term units are sold through recognized stock exchange and such transaction is subject to securities transaction tax, the gain arising thereon shall be taxable at concessional rate of 10% (plus applicable surcharge and cess) without indexation benefit under section 112A of the Income Tax Act, 1961.

If short-term units are sold through recognized stock exchange and such transaction is subject to securities transaction tax, the gain arising thereon shall be taxable at concessional rate of 15% (plus applicable surcharge and cess) without indexation benefit under section 111A of the Income Tax Act, 1961.

The Securities Transaction Tax will be levied as applicable.

The TDS certificates in Form 16A shall be issued to the unitholders on quarterly basis in ccordance with the timelines prescribed under the Income Tax Rules, 1962.

IndiGrid will issue the TDS certificates based on the following indicative timeline:

Quarter Actual payment of distribution Timeline for issue of TDS certificates
April to June On or before August 31 On or before 15 November
July to September On or before November 30 On or before 15 February
October to December On or before February 28/ 29 (as applicable) On or before 15 May
January to March On or before May 31 On or before 15 August

As per the provisions of Income Tax Act, 1961, liability to deduct TDS on income distributed by any ‘business trust’, i.e. IndiGrid in the present case, to its unitholders arises under section 194LBA of the Act.

Section 197A of the Act provides for exemption from deduction of taxes at source under certain ‘specified sections’, in case the payee/ recipient of income furnishes a declaration in the prescribed form (i.e. Form 15G or Form 15H, as the case may be) that his total income for such year shall not exceed the maximum amount not chargeable to tax (including such income for which Form 15G/ 15H is being submitted).

However, Section 197A does not cover grant of exemption for payments covered under section 194LBA. Accordingly, IndiGrid cannot consider the declaration in Form 15G/ 15H for deducting taxes under section 194LBA on income distributed by it to its unitholders and is required to deduct taxes as per the rates prescribed therein.

According to sub section (4) of section 115UA of Income Tax Act, 1961 read along with Rule 12CA of Income Tax Rules, 1962, any person responsible for making payment of the income distributed on behalf of a business trust to a unit holder is required to furnish a statement in Form 64B to the unit holder by 30th June of the financial year following the previous year in which income is distributed duly verified by the person distributing the income on behalf of the business trust in the manner indicated therein.

In case any of the investors has not received the same they can reach us at Complianceofficer@indigrid.co.in or support.indiagrid@kfintech.com with the subject line “ Non receipt of form 64B for FY xxxx” with following details :-

Name of unit holder
PAN of unitholder
DP ID & Client ID

IndiGrid has adopted a policy of quarterly distribution. Amount received from InvIT shall be taxable in the hands of unitholder in the financial year in which such income is received/ distributed.

The frequently asked questions (“FAQs”) addressed below have been provided for information purposes only. These do not, and should not be deemed to, constitute legal, financial, investment, tax or any other advice in relation to InvIT in general and India Grid Trust (“IndiGrid”) in particular. It should not be relied for any investment decisions and all prospective investors should consult their own professional advisors before making any investment decision regarding InvIT or IndiGrid. IndiGrid Investment Managers Limited, Axis Trustee Company Limited (collectively, the “Parties to IndiGrid”) and IndiGrid shall not be liable for consequences of any reliance on the FAQs. No assurance is given that the revenue authorities/courts will concur with the views expressed herein.

The FAQs do not, and should not be deemed to, constitute solicitation for investment, or invitation to offer, or offer in relation securities of either the Parties to IndiGrid or IndiGrid. The information provided in the FAQs is basis IndiGrid’s reading of applicable law as it stands on the date of publication and is subject to change (basis any change in law or market practice) and the Parties to IndiGrid or IndiGrid do not have any obligation to update the FAQs from time to time. All readers should independently verify the adequacy and accuracy of information provided in the FAQs.

To the full extent permissible under applicable law, IndiGrid disclaim all warranties, express or implied, including, but not limited to, express or implied warranties of merchantability and fitness for a particular purpose, title, compatibility, security of information, accuracy, non-infringement, or arising from these FAQs.

Further, to the full extent permissible under applicable law, neither IndiGrid nor any of its officers, directors, employees, representatives, agents, parent companies, subsidiaries, or affiliates will be liable for any damages of any kind, including, but not limited to, actual, direct, indirect, incidental, punitive, or consequential damages, or damages that may arise from the use of, or the inability to use, these FAQs or materials or information contained hereunder, whether the materials are provided by us or a third party.

Following are rights of Unitholders in terms of the SEBI (Infrastructure Investment Trusts) Regulations, 2014, as amended, and the concerned Circulars issued thereunder (SEBI InvIT Regulations)

  • To receive copies of the Annual Report containing the Balance Sheet, the Profit &Loss Account, and the Auditor’s Report on an annual basis. In case copies are not received, the investor can write to RTA on support.indiagrid@kfintech.com or to IndiGrid on complianceofficer@indigrid.co.in.
  • To participate and vote in general meetings either personally or through proxy. The investor can participate in general meetings virtually through audio & visual means or in-person for physical meetings, as the case may be and vote in the general meeting in-person and through e-voting, as the case may be.
  • To receive notice and forms for Postal Ballots. In case copies are not received, the investor can write to RTA on support.indiagrid@kfintech.com or to IndiGrid on complianceofficer@indigrid.co.in.
  • To receive Distributions within 15 days from the date of approval by the Board of Investment Manager
  • To request for TDS certificate, Form 64B, and other relevant documents/information related to the distribution made on a quarterly basis by writing to RTA on support.indiagrid@kfintech.com or to IndiGrid on complianceofficer@indigrid.co.in.
  • To receive corporate benefits like rights, bonus, etc. Once approved by the Board of Investment Manager.
  • To request an Extraordinary General Meeting in terms of Regulation 22(6) of SEBI InvIT Regulations in the following manner for matters referred in clauses (f) of sub-regulation (5) except sub-clause (vi).
    (a) not less than twenty-five per cent of the unitholders by value, other than any party related to the transactions and its associates, shall apply, in writing, to the trustee for the purpose;
    (b) with respect to sub-clause (vi), not less than sixty percent of the unitholders by value shall apply, in writing, to the trustee for the purpose.
  • – Other rights are as specified in the statutory enactments.
  • To receive interest/redemption payment in due time
  • To receive copies of the Annual Report containing the Balance Sheet, the Profit & Loss Account, and the Auditor’s Report.
  • To approach the Debenture Trustee with your grievance, if any.
  • Other rights are as specified in the statutory enactments / Debenture Trust Deed.